UK taxes for foreign income

I'm sorry if this has been covered in another thread, but I haven't been able to find one.  My wife and I moved to the UK in May 2021.  My wife is the Sole Representative for the company for whom she works and all her income is from that company.  I am retired and my pensions are from and paid in the US.  We have one bank account in the UK.  We will be filing for US taxes, do we also need to file for UK taxes even though our income originates outside the UK? 

Thanks!

We will be filing for US taxes, do we also need to file for UK taxes even though our income originates outside the UK? 

Thanks!

Yes, if you are resident in the UK for taxes then your worldwide income is subject to taxes with some exceptions depending on the US-UK Tax Treaty.

https://www.gov.uk/government/publications/usa-tax-treaties

In our case I receive 2 US private pensions and my wife receives SS.  My US pensions are taxed by both the UK and US but my wife's SS is ONLY taxed by the UK.  Similarly our UK SS (aka OAP) payments are only taxed by the UK.

Where income is taxed by both countries then foreign tax credits are applied to reduce the taxation.  In the example of my US pensions I file form 1116 with the "Resourced by Treaty" box checked to indicate that although this is US income it has been taxed by the UK and those foreign taxes should be credited against my US taxes.

Intestinally some practitioners state that the U.K OAP is taxable in both countries and that you'd use the foreign tax credit to offset.

Intestinally some practitioners state that the U.K OAP is taxable in both countries and that you'd use the foreign tax credit to offset.

I’m pretty sure our London based dual qualified US-UK has intestines and she is quite clear that if you live in the UK that the OAP and SS is only taxable in the UK.

I’ve also inquired on the TurboTax forum how to not pay tax on SS because of the treaty and seen that you negate it in Other Income. Unlike the OAP which you simply don’t report on the US return, you need to account for the SSB tax document sent to you and the IRS.

I’m pretty sure our London based dual qualified US-UK has intestines and she is quite clear that if you live in the UK that the OAP and SS is only taxable in the UK.

I’ve also inquired on the TurboTax forum how to not pay tax on SS because of the treaty and seen that you negate it in Other Income. Unlike the OAP which you simply don’t report on the US return, you need to account for the SSB tax document sent to you and the IRS.

I'm not at the SS or OAP point, so I can't speak from experience. Below is taken from TFX, I wonder how others report...

Taxation of Social Security Benefits
US Social Security Benefits
US Social Security benefits received by US citizens and green card holders residing in the UK are exempt from tax in the United States and are taxable only in the UK.

UK State Pension
UK State Pension and other payments received under the National Insurance legislation by US citizens and green card holders residing in the UK are taxable in both countries.

The foreign tax credit can be applied to eliminate double taxation.

I'm not at the SS or OAP point, so I can't speak from experience. Below is taken from TFX, I wonder how others report...

Taxation of Social Security Benefits
US Social Security Benefits
US Social Security benefits received by US citizens and green card holders residing in the UK are exempt from tax in the United States and are taxable only in the UK.

UK State Pension
UK State Pension and other payments received under the National Insurance legislation by US citizens and green card holders residing in the UK are taxable in both countries.

The foreign tax credit can be applied to eliminate double taxation.

We are both receiving OAP and my wife is receiving SS so I will be sure to report back here if anything changes and the IRS comes after us.

According to the US/UK Tax Treaty, as written, UK State Pension payments received by US citizens residing in the UK are taxable in both countries.

The Technical Explanation of the US/UK Tax Treaty gives rise to the question of whether the wording in the Treaty reflects the intentions of the authors of the Treaty, and in fact, if the intention was for it not to be taxed in the US in these circumstances.

Some advisors believe it should be declared on a 1040 return as per the Treaty, others believe it shouldn't. In other words, situation normal for the reporting requirements for USC expats. (Possibly issue #1,876 out of the 14,734 questionable issues concerning expats, or perhaps not.) I'm not sure the IRS really cares.

For a USC resident in the UK and receiving a UK State Pension payment who is in the 40% UK tax bracket, it may be wise to declare it on a 1040. If a stance is taken not to report it, the TP loses all tax paid to the UK on the pension (Form 1116) similar to US SS. If it is declared, the tax paid to HMRC can be claimed. For 1116, the IRS will care.

In any case, blanket statements on this issue should always carry a caveat, one way or the other.

Yes, if you are resident in the UK for taxes then your worldwide income is subject to taxes with some exceptions depending on the US-UK Tax Treaty.

https://www.gov.uk/government/publications/usa-tax-treaties [nofollow]

In our case I receive 2 US private pensions and my wife receives SS.  My US pensions are taxed by both the UK and US but my wife's SS is ONLY taxed by the UK.  Similarly our UK SS (aka OAP) payments are only taxed by the UK.

Where income is taxed by both countries then foreign tax credits are applied to reduce the taxation.  In the example of my US pensions I file form 1116 with the "Resourced by Treaty" box checked to indicate that although this is US income it has been taxed by the UK and those foreign taxes should be credited against my US taxes.

Great.  Thank you! 

I'm going to be looking for someone who can file both my US and UK taxes.  Any suggestions?  Ideally, I would like to find someone who won't charge me thousands of pounds. 

Great.  Thank you! 

I'm going to be looking for someone who can file both my US and UK taxes.  Any suggestions?  Ideally, I would like to find someone who won't charge me thousands of pounds.

Here is a post with links to many tax preparers, you'll need to research them a bit yourself.

https://talk.uk-yankee.com/index.php?topic=97064.0

Thanks!